System and method for operating a family of mutual funds or ETFs

ABSTRACT

A system and method operates a family of exchange traded funds or mutual funds with different weighted average maturities.

CROSS REFERENCE TO RELATED APPLICATION

This application claims the benefit of U.S. Provisional PatentApplication Ser. No. 61/844,819, entitled “Method and Apparatus forOperating a Family of Mutual Funds or ETFs” filed on Jul. 10, 2013 byWalter Bettinger II, Marie Chandoha and Jonathan de St Paer, having thesame assignee as the present invention, and is hereby incorporated byreference in its entirety.

FIELD OF THE INVENTION

The present invention is related to computer software and morespecifically to computer software for operating financial funds.

BACKGROUND OF THE INVENTION

Conventional money market mutual funds use a share price of a dollar andpay dividends via share increases, holding the net asset value of eachof the shares in the mutual fund at a price of one dollar per share asthe total value for the fund rises. If a money market mutual fund hasone or more investments where the party receiving the funds for aninvestment partially or totally defaults, the net asset value of themoney market mutual fund could be less than a dollar. Under currentregulations, if the net asset value of a money market mutual fund dropsbelow a dollar, the fund would be required to cease operations. What isneeded is a different approach to investing.

SUMMARY OF INVENTION

A system and method operates a family of mutual funds or ETFs.

Each fund in the family of funds shares some operating features incommon, and the party that manages such fund may, directly orindirectly, advertise some or all of such features. The features of eachfund may include an average fund duration of less than one year and/oreach fund holding securities of high credit quality, for example, ratedA− or above. A− is used in one embodiment, but securities having othercredit ratings may be used in other embodiments.

Each fund in the family has a different weighted average maturity range,within which the weighted average maturity of the fund may be selected.In one embodiment, the weighted average maturity of each fund in thefamily is a number of days that may not be outside the range of thatrespective fund. The different ranges may each start at zero and havedifferent maximums, or the ranges may differ within a range, so that,for example, one fund has a weighted average maturity range of 20-30days, and another has a weighted average maturity range of 110-120 days.In one embodiment, each fund in the family has a completely differentweighted average maturity range from the other funds in the family, forexample, one fund having a weighted average maturity range of 0-30 days,another fund having a weighted average maturity range of 31-89 days andanother fund having a weighted average maturity range of 90-180 days.The weighted average maturity ranges may be contiguous as with the priorexample, or they may have one or more gaps between them, for example, ifthe weighted average maturity range of the middle fund in the exampleabove was 35-89 or 35-85 days. In one embodiment, instead of one or moregaps of weighted average maturities, there are one or more overlaps inthe weighted average maturities of the funds in the family, for exampleif the weighted average maturity of the middle fund in the example abovewas 25-89 or 25-95 days. In one embodiment, each gap or overlap inweighted average maturity is less than 30%, 25%, 20% or 10% of theweighted average maturity range of the fund with the smallest or largestsuch range or the total range of all the funds in the family. In anotherembodiment, the weighted average maturity range of one or more fundscompletely overlaps one or more other funds, or the weighted averagematurity range of a fund may completely consume all of the smallerduration ranges of the other funds in the family, for example, withweighted average maturities of 0-30, 0-90 and 0-180 days, respectivelyfor a family of three funds, though other numbers of funds in the familymay be used. Though maturities and weighted average maturities are usedherein to describe the family funds, the funds in the family may also orinstead be differentiated using different weighted average durationranges or different asset classes.

To operate the funds, a first fund in the family is selected. If thefamily uses mutual funds, shares of the selected mutual fund that weresold or bought by investors before the last quoted price are sold orredeemed for cash at that quoted price, which, as noted below, is thequoted price at the end of each trading day. In other embodiments, afterhours orders are permitted.

If the family of funds of different weighted average maturities usesETF's, creation units are sold to, and redeemed from, authorizedparticipants in exchange for in-kind securities and/or cash at the endof the trading day, though orders may be placed throughout the day. Thein-kind securities are specified by the ETF provider.

In-kind securities may be specified using any of several techniques. Inone embodiment, in-kind securities for sale of creation units are thesame as those for redemption, though in another embodiment, the in-kindsecurities for sale may be different from those for redemption becausethe make-up of the fund has changed between the date the creation unitor units were sold to the authorized participant and the date thecreation unit or units were redeemed by the fund. The in-kind securitiesfor purchase are those the fund wishes to receive to move the weightedaverage maturity (or duration) to a target or maintain the weightedaverage maturity at its current target if that target is optimal at thetime, even though the target could change at a different time. Thein-kind securities for redemption may be those the fund has or those thefund wishes to dispose of, such as shorter maturity securities or loweryielding securities.

In one embodiment, the differences between in-kind securities used forsale of creation units and those used for redemptions are in the lengthof maturity: for example, specifying longer maturities for sale than forredemption. In one embodiment, the maturity is the only difference, so,for example, if a bond from IBM having a 120 day maturity is one of thein-kind securities for sale of the creation units, a bond from IBMhaving less than 30 day maturity may be the corresponding in-kindsecurity for redemption.

In one embodiment, the in-kind securities are specified as severalclasses of several securities in each of one or more of the classes, aswell as a proportion of each class that is to be provided and a totalamount; creation units may be purchased and redeemed for the totalamount, paid by the party receiving the creation units selecting anysecurities in each class, in the proportions or amounts specified, withany rounding errors made up in cash.

Any cash received by a mutual fund or ETF may be used to purchasesecurities, using any of several constraints identified by the fundmanager, or identified using inputs provided by the fund manager. Forexample, if the fund manager identifies the date of an event that thefund manager believes will cause interest rates to rise, the system andmethod may identify a constraint that no securities will be purchasedhaving a maturity past that date, but that the target weighted averagematurity of the entire portfolio for the fund should be a number of daysuntil the date of the event or a different date.

The fund manager may also identify a universe of securities from whichpurchases may be made, and formulas for evaluating one security overanother, such as AA-rated securities should provide at least X % of thereturn of A-rated securities. Cash deficits may cause the securities inthe portfolio of the fund to be sold, using constraints or inputs fromthe fund manager. Using the example above of the event, a preference forsecurities to sell may be made for those having maturities after theevent that is expected to cause interest rates to rise, and the formulasmay be used to determine which securities to sell.

In one embodiment, the events, formulas, and target weighted averagematurity (or duration) may be used to replace securities within theportfolio to try to achieve the target weighted average maturity, takinginto account the information about the events and the formulas, as wellas the tax effects of making such trade, and the in-kind securities tobe provided in a redemption in the near future.

Quotation information for the selected fund may be provided, such as NAVor other related quotations, at the time or times quotations for suchtype of funds are provided conventionally. The quotation information maybe provided to a conventional quotation server or servers, which processhigh volumes of inputs and requests for quotations. If there are morefunds, the next fund in the family is selected, and the processdescribed above repeats for the newly selected fund. Otherwise, after anoptional wait period, the first fund in the family is selected and theprocess repeats using that fund.

Except for the features noted herein, all funds of a type (e.g. ETF,mutual fund, etc.) are operated in a conventional manner for that type.

BRIEF DESCRIPTION OF THE DRAWINGS

FIG. 1 is a block schematic diagram of a conventional computer system.

FIG. 2 is a flowchart illustrating a method of operating funds accordingto one embodiment of the present invention.

FIG. 3 is a block schematic diagram of a system for operating fundsaccording to one embodiment of the present invention.

FIG. 4 is a block schematic diagram of an issuer/provider system 322 ofFIG. 3 shown in more detail according to one embodiment of the presentinvention.

DETAILED DESCRIPTION OF A PREFERRED EMBODIMENT

The present invention may be implemented as computer software on aconventional computer system. Referring now to FIG. 1, a conventionalcomputer system 150 for practicing the present invention is shown.Processor 160 retrieves and executes software instructions stored instorage 162 such as memory, which may be Random Access Memory (RAM) andmay control other components to perform the present invention. Storage162 may be used to store program instructions or data or both. Storage164, such as a computer disk drive or other nonvolatile storage, mayprovide storage of data or program instructions. In one embodiment,storage 164 provides longer term storage of instructions and data, withstorage 162 providing storage for data or instructions that may only berequired for a shorter time than that of storage 164. All storageelements described herein may include conventional memory and/or diskstorage and may include a conventional database.

Input device 166 such as a computer keyboard or mouse or both allowsuser input to the system 150. Output 168, such as a display or printer,allows the system to provide information such as instructions, data orother information to the user of the system 150. Storage input device170 such as a conventional floppy disk drive or CD-ROM drive accepts viainput 172 computer program products 174 such as a conventional floppydisk or CD-ROM or other nonvolatile storage media that may be used totransport computer instructions or data to the system 150. Computerprogram product 174 has encoded thereon computer readable program codedevices 176, such as magnetic charges in the case of a floppy disk oroptical encodings in the case of a CD-ROM which are encoded as programinstructions, data or both to configure the computer system 150 tooperate as described below.

In one embodiment, each computer system 150 is a conventional SUNMICROSYSTEMS T SERIES SERVER running the SOLARIS operating systemcommercially available from ORACLE CORPORATION of Redwood Shores,Calif., a PENTIUM-compatible personal computer system such as areavailable from DELL COMPUTER CORPORATION of Round Rock, Tex. running aversion of the WINDOWS operating system (such as XP, VISTA, or 7)commercially available from MICROSOFT Corporation of Redmond Wash. or aMacintosh computer system running the MACOS or OPENSTEP operating systemcommercially available from APPLE INCORPORATED of Cupertino, Calif. andthe FIREFOX browser commercially available from MOZILLA FOUNDATION ofMountain View, Calif. or INTERNET EXPLORER browser commerciallyavailable from MICROSOFT above, although other systems may be used. Eachcomputer system 150 may be a SAMSUNG GALAXY NEXUS III commerciallyavailable from SAMSUNG ELECTRONICS GLOBAL of Seoul, Korea running theANDROID operating system commercially available from GOOGLE, INC. ofMountain View, Calif. Various computer systems may be employed, with thevarious computer systems communicating with one another via theInternet, a conventional cellular telephone network, an Ethernetnetwork, or all of these.

Method.

FIG. 2 is a flowchart illustrating a method for creating, advertising,and operating funds according to one embodiment of the presentinvention.

Create/Advertise Two or More ETFs/Mutual Funds, Holding Ultra ShortDuration and/or Maturity, High Credit Quality Financial Instruments,Each with Different WAM Ranges.

Referring now to FIG. 2, a “family” of two or more funds, such as afamily of two or more Exchange-Traded Funds (ETFs) or a family of two ormore mutual funds, is created and advertised, and each of such two ormore funds included in the family are operated with the followingcharacteristics: an ultra short weighted average maturity and/orduration; fund holdings that are each high credit quality investments;and a weighted average maturity (WAM) range which is different than thatof any of the other one or more ETFs and/or mutual funds in the family216 as described above. In one embodiment, returns corresponding to eachof the funds of the same type (ETF or mutual fund) in the family mayalso differ from the other funds in the family, and after a conventionalperiod of fund operation, the historical returns corresponding to eachfund of the same type in the family may additionally differ from thehistorical returns corresponding to each of the other one or more familyfunds. In one embodiment, a family of funds may have only one type offunds, either ETFs or mutual funds or still a different type of fund,and in another embodiment, a family of funds may have multiple types offunds.

In one embodiment, securities or investments with a high credit qualityor financial rating are identified as those designated with a creditquality rating of A- or above, and as described herein, only such highcredit quality rated securities are added to the holdings of any fund inthe family.

In one embodiment, the funds in the family created and advertised may betwo or more ETFs, or two or more mutual funds, each of which operates asdescribed herein. The weighted average maturity (WAM) of the securityholdings of each fund, which may be calculated based on the length ofmaturity and the dollar value of any investments held by each fund, isultra short (e.g. twelve months or less).

Each of two or more funds included in the family is created andadvertised with a different (ultra short) WAM range than each of theother one or more funds in the family. For example, three distinctmutual funds may be created and advertised as a family, with the firstfund in the family having a WAM range of 0-180 days, the second fundhaving a WAM range of 0-120 days, and the third fund having a WAM rangeof 0-30 days, though any of the funds in the family may have any otherWAM range, which may be a range defined using days, months, years, orany other expression of time, and the family of funds may also operatewith any other combination of different WAM ranges. Other WAM ranges maybe used as described herein.

Although the length of maturity of securities, along with weightedaverage maturities corresponding to funds, are used herein to describe adifferentiation among funds in the family, other values, such as thelength of duration of securities and weighted average durationscorresponding to funds, may also be used to distinguish each of suchfunds. For example, the family of funds may be created and advertisedsuch that the weighted average duration corresponding to the securityholdings of each fund is ultra short, and each of the funds has adifferent weighted average duration range than each of the other familyfunds.

In one embodiment, the NAV corresponding to each of the two or morefunds created and advertised is an unrestricted NAV and may fall below(or rise above) the purchase NAV paid by any purchaser when suchpurchaser purchases shares or creation units of any of the funds in afamily.

Select First Fund.

An ETF or mutual fund is selected 218 from any of the two or more ETFsand/or mutual funds in the family, created and advertised as describedabove with respect to step 216.

If Mutual Fund, Sell/Redeem Shares for Cash.

If the selected fund is a mutual fund 230, then shares of the selectedfund are sold and/or redeemed for cash according to the net asset valueof the fund 232. In one embodiment, shares of the selected mutual fundare sold by the issuer of such mutual fund for cash (and such shares mayalso be redeemed from the mutual fund issuer for cash), and the netasset value corresponding to each share of the selected mutual fund mayincrease or decrease responsive to the value of any assets held by themutual fund, as well as the number of shares of such mutual fund held byall shareholders. In one embodiment, the price per share, or NAV,received from a shareholder purchasing shares of the selected mutualfund may be less than, more than, or equal to the NAV paid out to suchshareholder when the shares are redeemed for cash. In one embodiment,orders corresponding to the purchase or sale of fund shares of theselected mutual fund may be received throughout the day, and any suchorders received are processed at step 232 at the close of each tradingday using the most recently calculated NAV (described in more detailbelow) corresponding to the selected fund as the price per fund share.

If ETF, Identify in-Kind Securities/Parameters, Create/Redeem CreationUnits Using Securities or Cash.

If the selected fund is an ETF 230, then a basket of in-kind securities,including parameters, is identified, and creation units of the selectedETF are created and redeemed using the basket of securities and/or cash234. In one embodiment, orders to purchase or sell creation units of theselected ETF may be received anytime during the trading day, and/orwhile the market is closed, and any such orders are processed at thenext calculated NAV. However, the shares of each ETF corresponding tosuch creation units may be traded on a securities exchange throughoutthe trading day, in a conventional manner.

In one embodiment, the basket of in-kind securities identified for theselected fund specifies the in-kind securities that the ETF provider ofthe selected ETF will accept in exchange for a creation unit (i.e. blockof shares) of the selected ETF. In one embodiment, such basket ofin-kind securities also includes parameters, such as the proportions ornumber of shares of the securities included in the basket of in-kindsecurities that are accepted by the ETF provider. The in-kind securitiesspecified by the identified basket, in the proportions specified by thecorresponding parameters, are received from an authorized participant,which may be a broker-dealer or any other participant authorized topurchase or redeem creation units of the selected ETF, and in exchangefor the in-kind securities received, such authorized participant isprovided with a creation unit of the selected ETF from which theauthorized participant can resell shares of the selected ETF.

When the creation unit of the selected ETF is redeemed, such creationunit of the selected ETF is returned by the authorized participant andredeemed for a basket of in-kind securities, which may include the samesecurities and proportions as was used to purchase the creation unit, ordifferent securities and/or proportions, as the purchase basket ofin-kind securities. Cash may be used instead of some or all of thesecurities in the basket. In one embodiment, one basket of in-kindsecurities (“purchase basket”) may be specified as the in-kindsecurities required from an authorized participant wishing to purchase acreation unit of the selected ETF, and a different basket of in-kindsecurities (“redemption basket”) may be specified as the basket ofin-kind securities which are provided to the authorized participant whenthe creation unit is redeemed. In such embodiment, the securitiesincluded in the purchase basket and redemption baskets may differ basedon the maturity of some or all of the securities or there may be otherdifferences. In one embodiment, the securities included in the purchasebasket of in-kind securities corresponding to the selected ETF may beselected based on any current ‘events or anticipated events, such asfederal reserve announcements, economic conditions, etc, or any otherinformation.

In one embodiment, a fixed set of securities may be identified as thebasket of in-kind securities, or classes of securities may be identifiedfor such basket. If the basket of in-kind securities is a fixed set ofsecurities, then the fixed proportion of each security included in suchset (or a cash equivalent) is provided by the authorized participant toreceive the creation unit of the selected ETF.

If classes are identified for the basket of in-kind securities, then twoor more classes of securities are allocated to such basket of in-kindsecurities, and two or more securities are specified for each of atleast one of the classes of securities, along with parameters for theproportion of securities that are required from each class in order toreceive the creation unit of the selected ETF. In one embodiment,classes of securities may be organized based on any number of factors,such as the quality rating of the securities included in each class, thematurity of such securities, and/or any other factors or combination offactors corresponding to the securities included in each class ofsecurities.

In one embodiment, a cash component may additionally be specified aspart of the basket of in-kind securities corresponding to the selectedETF, including parameters specifying the amount or proportion of suchcash component. In another embodiment, the proportion of the cashcomponent included in the basket of in-kind securities corresponding tothe selected ETF may be specified as 100% or the entire basket, such asif creation units of such ETF are sold to, and/or redeemed from, anyauthorized participant using all cash and no securities.

If Cash Surplus/Deficit, then Buy/Sell Securities to Maintain WeightedAverage Maturity Range.

If the purchases and/or redemptions corresponding to the selected fundresulted in a net cash surplus or deficit 236, then securities arepurchased and/or sold according to such surplus or deficit cash in amanner which will move the WAM corresponding to the selected fund in adirection that is within an acceptable range, and at least toward anoptimal point (i.e. the target WAM) in such range 238. In oneembodiment, the optimal point in the WAM range corresponding to theselected fund may be determined based on current or anticipated events,such as those corresponding to federal reserve announcements, economicconditions, etc., as described in more detail below. The methodcontinues at step 240.

Check WAM, Compare to Acceptable Range.

The WAM corresponding to the selected fund is checked and compared tothe optimal point in the range identified for such WAM 240.

If the WAM corresponding to the selected fund is within the acceptableWAM range and at its optimal point in such acceptable WAM range 242,then the method continues at step 250.

If WAM is not within Range, Sell and Buy Holdings to Maintain Range.

If the WAM corresponding to the selected fund is not within theacceptable WAM range for such fund, or if the WAM corresponding to theselected fund is not at the optimal point in the acceptable WAM rangefor such fund 242, then securities included in the selected fund'sholdings of securities may be sold and optionally replaced withdifferent securities to put the WAM of the selected fund back within theacceptable WAM range, and/or put the WAM at or closer to its optimalpoint in such acceptable WAM range, in a manner designed to maximize theafter-tax return of the selected fund 244. For example, in oneembodiment, if the WAM of the selected fund is determined to be too longfor the fund's acceptable WAM range, then securities with longermaturities (and which may also contribute least favorably to the fund'sreturns) may be sold from the selected fund's holdings and replaced withshorter securities (which also contribute most favorably to the fund'sreturns). Other factors may be used when deciding which securities tobuy and/or sell, such as sector exposure, liquidity, cross transactions,etc. The method continues at step 250.

Determine if Quote Time.

At step 250, a determination is made whether a quote time correspondingto the selected fund has been reached. In one embodiment, a quote timecorresponding to the selected mutual fund is any date and time at whichcurrent quotation information, including the NAV or dividendscorresponding to the selected fund, may be retrieved, such as via aconventional stock exchange. In one embodiment, a quote time for amutual fund is the end of any trading day for such fund. A quote timefor an ETF may be reached at any regular or irregular time interval,such as every fifteen seconds or as frequently as possible, which occurswhile the market on which the ETF is listed is operating.

If not Quote Time.

If a quote time corresponding to the selected fund is not reached 252,then the method continues at step 258.

If Quote Time, then Identify Value of Fund's Holdings Via Exchange(S),Identify Quotation for Fund.

If a quote time corresponding to the selected fund is reached 252, thenthe sum value of all assets included in the selected fund's portfolio isidentified via one or more conventional markets and/or exchanges or viaa conventional valuation service described below, and a quotation forthe NAV corresponding to the selected fund is identified using suchidentified assets value less any fund liabilities and the total numberof shares of the selected fund which are currently outstanding 254. Inone embodiment, to identify the NAV quotation corresponding to theselected fund, the value of each of every asset included in the selectedfund's holdings of securities is identified via one or more conventionalvaluation services which value securities based on actual trades ortrades of other similar securities. The values of all such assets andany cash balance are summed to identify the total asset value of theselected fund, and then such total asset value identified is divided bythe number of shares represented by the selected fund's assets. In oneembodiment, any fund liabilities are also identified corresponding tothe selected fund and subtracted from the total value of the assets ofthe selected fund, and then such total asset value minus fundliabilities is divided by the number of fund shares to determine thequotation for the NAV corresponding to the selected fund. Otherconventional methods of computing a quotation may also be used.

In one embodiment, the number of shares represented by the selectedfund's assets is the total number of shares of the selected fund thatare outstanding, if the selected fund is a mutual fund, or it is thetotal number of outstanding creation units of the selected fundmultiplied by the number of shares per creation unit (e.g. 50,000), ifthe selected fund is an ETF.

Provide Quote to Shareholders and Potential Investors.

The NAV quotation identified for the selected fund is provided 256 toshareholders and potential investors. In one embodiment, the NAVquotation for the selected fund is provided to shareholders andpotential investors through one or more exchange quotation servers, atleast one of which is also an exchange quotation server to whichinformation about NAV for other funds in the family and returns for atleast one other fund is provided. Bid/ask prices for ETF shares may alsobe provided in a conventional manner by the same or other quotationservers. Each of any exchange quotation servers described hereinincludes a high transaction volume server capable of handling largenumbers of quotations, including processing high volumes of changes tosuch quotations and requests for such quotations.

In one embodiment, the NAV quotation for the selected fund, if theselected fund is an ETF, is provided to shareholders and potentialinvestors as an intraday quotation value, such as an indicativeoptimized portfolio value (IOPV) or an intraday indicative value (IIV),approximating the net asset value of the such selected ETF.

If More Funds, then Select Next Fund.

If there are more funds included in the family of funds corresponding tothe selected fund to process in the manner described above 258, then thenext of such funds is selected from the family of funds 260, and thenmethod continues at step 230 with the newly selected fund. In oneembodiment, the family of funds corresponding to the selected fundincludes each of the other one or more funds, of the two or more fundsdescribed above as part of step 216, which is operated in the samemanner as the selected fund and has a different WAM than the selectedfund. In one embodiment, all such funds included in the family of fundsare managed by the same entity, such as a corporation, which may be theETF provider of such family of funds, if the selected fund is an ETF, orit may be the mutual fund issuer of such family of funds, if theselected fund is a mutual fund.

If No More Funds, then Wait.

If there are no more funds in the family of funds corresponding to theselected fund to process in the manner described above 258, then themethod waits 262 for a short period of time, or for no period of time,and then continues at step 218.

System.

FIG. 3 is a block-schematic diagram of a system for creating,advertising, and operating funds according to one embodiment of thepresent invention.

FIG. 4 is a block schematic diagram of a representative issuer/providersystem 322 of FIG. 3 shown in more detail according to one embodiment ofthe present invention.

The system may be implemented via one or more hardware processors,operating as described herein and below. The processors may be undersoftware or firmware control.

Referring now to FIGS. 3 and 4, the system of FIG. 3 contains any numberof shareholder devices 310, quotation servers 312, authorizedparticipant systems 314, exchange system 320, an issuer/provider system322, and a system administrator system 330, though other arrangementsmay be used. Each of these may include conventional computer systems orserver computer systems.

Issuer/provider system 322 includes a server including a communicationinterface 410, which may include a conventional communication interfacerunning suitable communication protocols, such as Ethernet, TCP/IP orboth. In one embodiment, unless otherwise noted herein, allcommunication in and out of issuer/provider system 322 are viainput/output 408 of its communication interface 410. Each of systems310, 312, 314, 320, 322 and 330 may also be coupled to network 308 viaeach systems respective communication interface (not shown), which maybe similar to communication interface 410 of issuer/provider system 322.

Shareholder device 310 may include a conventional computer system ormobile device and may be used, such as by shareholders, potentialinvestors, advisors and other similar parties of any mutual fund or ETF,to review quotation, yield and NAV information from quotation servers312 and trade shares of such fund or funds as described herein viaexchange servers 310. In one embodiment, investors, using shareholderdevice 310, obtain quotations information, yield information, or anyother information corresponding to any funds from quotation servers 312,as described above, and such information is used for analysis as well asfor buying and selling fund shares.

Quotation server 312, which may include a conventional securitiesquotation server adapted to handle high transaction volumes ofquotations, as described above, receives information regardingquotations and/or yield, for example, from exchange servers 320 andprovides quotation and yield information for each fund in the family offunds and other conventional funds and/or securities to shareholderdevice 310. Quotation servers 312 may include servers of conventionalvaluation services which provide estimates of value as “quotations”.

Issuer/provider system 322 may include a conventional computer systemand is programmed to operate a family of ETFs or mutual funds asdescribed in more detail below.

Exchange servers 320 may include a conventional securities exchangeserver adapted to handle high transaction volume to allow users topurchase, sell, or otherwise exchange securities and/or cash, or performany other conventional transactions corresponding to securities.Conventional bid and ask information may be received for ETFs such asthose described herein and used to provide bid and ask quotationinformation to quotation servers 312.

Authorized participant system 314 may include any conventional computersystem used to trade ETF creation units via issuer/provider system 322and ETF shares via exchange servers 320 as described above.

System administrator system 330 may include a conventional computersystem to be used by a system administrator, such as a fund manager orother system administrator, as described above and in more detail below.

All systems and some or all elements of FIGS. 3 and 4 operate via one ormore hardware processors as described herein and communicate via network308, which may include one or more conventional Ethernet networks, theInternet, or both.

In one embodiment, issuer provider system 322 is programmed to createand advertise, as described above, as well as operate in the mannerdescribed above and in more detail below, a family of two or more funds,which may be two or more Exchange-Traded Funds or two or more mutualfunds. As described herein, each of the two or more funds in the familyholds financial instruments which average to an ultra short weightedmaturity (or duration) length and are high credit quality rated. Eachfund in the family is operated with a different weighted averagematurity (WAM) range from any other of the funds in the same family oftwo or more funds as described herein.

As noted above, maturity lengths corresponding to securities andweighted average maturity lengths corresponding to each of the familyfunds are used herein to describe a means of differentiating among thefunds in the family; however, other values, such as durationscorresponding to securities and weighted average durations correspondingto each of the funds, may also be used, or used instead, to distinguisheach of such funds.

In one embodiment, securities used in any family of funds are taxablefixed income securities, such as taxable bonds. Other embodimentsinclude tax-advantaged or tax free securities such as treasurysecurities and/or municipal securities for a given fund or for all fundsin the same family. In one embodiment, funds in a family may haveidentical WAM ranges or different WAM ranges, but invest in differentasset classes as described above.

In one embodiment, system administration manager 420 of issuer/providersystem 322 receives from a system administrator (e.g. a fund manager),information about a family of two or more funds, including a fundidentifier corresponding to each of the two or more funds, and a WAMmaximum and WAM minimum corresponding to each of the two or more funds.In one embodiment, the family of two or more funds may be a family oftwo or more mutual funds or two or more Exchange-Traded Funds (ETFs), asdescribed above, and the maximum WAM and minimum WAM corresponding toeach fund are the upper and lower bounds defining an acceptable WAMrange corresponding to each fund. In one embodiment, the minimum WAM iszero and such minimum WAM need not be received. In one embodiment, theWAM corresponding to a family fund is the weighted average maturitycalculated for the holdings of such fund when the maturity correspondingto each security holding is weighted by the amount, in dollars, of suchsecurity that are held in the fund holdings, as described above. Forexample, if the holdings of a very simplified Example Fund include a $60investment in Security A with a maturity of 20 days, and a $20investment in Security B which has a maturity of 5 days, then theaverage weighted maturity of the holdings of such fund is calculated as16.25 days. In one embodiment, the acceptable WAM range, defined by theWAM maximum and WAM minimum, received corresponding to each fundidentifier is different than every other WAM range receivedcorresponding to any other fund identifier received, as described above.

System administration manager 420 stores each of the two or more fundidentifiers received corresponding to the family of funds in WAMparameters storage 418, each associated with the corresponding WAMmaximum and WAM minimum received for that fund. In one embodiment,system administration manager 420 also stores each of the received fundidentifiers in cash account storage 412, securities storage 414, andfund shares storage 416.

In one embodiment, system administration manager 420 also receives fromthe system administrator (e.g. fund manager) a list of initialsecurities holdings, if any, corresponding to each of the fundidentifiers received, which system administration manager 420 stores insecurities storage 414. In one embodiment, the list of initialsecurities holdings corresponding to a fund includes any number ofsecurity identifiers which each correspond to a security (e.g. stocks,bonds, or any other financial instruments, as described above) held bythe fund, each security identifier with its corresponding price, creditquality rating, yield, and maturity, as well as the number of shares orother quantity of each security that are held in the fund, as describedabove.

System administration manager 420 additionally receives any number offamily fund attributes, securities evaluation formulas, and financialclimate events from the system administrator. Such information may bereceived for each fund in the family and/or for all funds in the family.When information is received for each fund, it is received, andoptionally stored, with an identifier of the fund to which itcorresponds.

In one embodiment, family fund attributes include any number ofcharacteristic requirements corresponding to security holdings includedin any of the family funds. A family fund is a fund in a family. Theremay be any number of families. In one embodiment, all securitiesincluded in, or added to, the holdings of any family fund will meet therequirements described by the family fund attributes, as describedabove. In one embodiment, family fund attributes may include a maturityof twelve months or less, a single A− credit quality rating or above,and any other characteristic requirements, as described above. Otherembodiments allow differences of such attributes or characteristicsbetween funds in a family.

Securities evaluation formulas include any formulas or processes whichmay be used to evaluate and/or select securities to be added to, orremoved from, the holdings of any fund included in the family of funds.In one embodiment, securities evaluation formulas may be formulas usedto calculate and/or evaluate a risk-adjusted yield for securities withdifferent credit quality ratings. The risk-adjusted yield of securitiesmay be used, as described in more detail below, to compare securitieswith different credit quality ratings and/or determine which securities,if any, to purchase, sell, or replace from the securities holdings of afamily fund. In general, among securities which have similar creditquality ratings and maturity dates, the securities that offer the mostfavorable yield are calculated to have the highest risk-adjusted yield;or, if the yield offered by securities are identical and the creditquality rating varies from “A” to “AA” to “AAA”, then the securitieswith the most favorable credit quality ratings are calculated to havethe highest risk-adjusted yield, and such securities with the highestrisk-adjusted yield and also a maturity which adjusts the WAM of a fundtoward its optimal place (i.e. the target WAM), as described in moredetail below, may be selected as securities to add to a fund's holdingsover other securities with a lower risk-adjusted yield or a maturitywhich does not adjust the WAM of the fund toward its optimal place; or,if the yield offered for a security is very high relative to its risk(e.g. above a threshold yield and/or threshold risk-adjusted yield),then such a security may be added to a fund's holdings even if itsmaturity does not adjust the WAM of the fund toward its optimal place.Securities evaluation formulas and the use of such securities evaluationformulas are additionally described in more detail below.

In one embodiment, a financial climate event, including an event dateand a predicted impact on interest rates, may be any event that isexpected or predicted to occur at a future date, which may affect anycurrent quotations, rates, or yields; and/or any future quotations,rates, or yields, such as the current or future price for anysecurities, current or future interest rates, or any other current orfuture aspects of the financial climate or of any financial markets. Inone embodiment, the predicted impact on interest rates or yieldscorresponding to a financial climate event may be received as oneexpected to cause higher interest rates or yields, much higher interestrates or yields, lower interest rates or yields, or much lower interestrates or yields. An example of a financial climate event is an expectedmeeting of, and/or announcement from, the Federal Reserve. If theFederal Reserve is expected to hold a meeting on April 1 and potentiallymake an announcement to raise federal interest rates on such date, thenthe event date, April 1, and the predicted impact of higher federalinterest rates corresponding to such event date, may be received bysystem administration manager 420 as a financial climate event.

In one embodiment, system administration manager 420 may also receive(or retrieve) current quotations information from quotation servers 312,as described herein. In one embodiment, current quotations informationis information that may be used to make any decisions, such asfuture-dependent decisions, regarding the securities holdings of fundshares of any fund included in the family of funds described herein.Such information may include conventional quotation informationincluding prices, rates, yields, or other similar information, as wellas current federal fund rates or interest rates, current inter-banklending rates, current interest rates on Treasury Inflation ProtectedSecurities Funds (TIPS), and/or any other current rates forfuture-dependent securities or markets.

System administration manager 420 may receive and/or retrieve familyfund attributes, security evaluation formulas, financial climate events,and current quotations information at any time, and also receive and/orretrieve any changes or updates to such information at any time, andsystem administration manager 420 stores any such family fundattributes, security evaluation formulas, financial climate events, andcurrent quotations information received and/or retrieved in WAMparameters storage 412 along with the date and time that the informationis received or retrieved, and for information corresponding to aspecific one or more fund, along with the identifier or identifiers, ifany, of the fund or funds to which such information corresponds. In oneembodiment, system administration manager 420 may receive suchinformation described herein from one system administrator (e.g. fundmanager) at issuer/provider system 322, or it may receive theinformation from more than one such administrator.

In one embodiment, when system administration manager 420 stores suchinformation in WAM parameters storage 418, and in one embodiment, whenit receives and stores updates to such information (e.g. new financialclimate events, or new current quotations information, etc.), systemadministration manager 420 signals WAM optimization manager 422 tocalculate the target WAM corresponding to the fund or funds in thefamily corresponding to such received information in WAM parametersstorage 418, or recalculate the target WAM for any or all of such funds,as described above and in more detail below.

At least once a day, investment manager 424 retrieves securitiesinformation from quotation servers 312 and identifies and stores a listof available, permissible securities in price/yield/maturity storage 419along with the date and time when such list is stored. In oneembodiment, the list of available, permissible securities informationincludes any number of securities available for trading via exchangeservers 320, which are additionally permissible to be added to theholdings of a family fund based on family fund attributes of securitiesholdings of any family fund, as described above. Investment manager 424identifies permissible securities from the available securitiesretrieved from quotation servers 312 using the family fund attributes inWAM parameters storage 418 (or receives a list of them from the systemadministrator via system administration manager 420), and stores asecurity identifier, price, rating, maturity, and yield inprice/yield/maturity storage 419 corresponding to each such available,permissible security identified.

WAM optimization manager 422 receives the signal from systemadministration manager 420 and identifies target WAMs corresponding toeach of the fund identifiers in WAM parameters storage 418. To identifythe target WAM corresponding to a fund identifier as described above,WAM optimization manager 422 identifies the acceptable WAM rangecorresponding to such fund identifier in WAM parameters storage 418, andWAM optimization manager 422 also identifies any financial climateevents in WAM parameters storage 418 which are applicable to theacceptable WAM range identified and, optionally, which are not alreadypriced in to the market and the current price for securities, asdescribed above and in more detail below.

In one embodiment, WAM optimization manager 422 identifies the financialclimate events applicable to the acceptable WAM range corresponding tothe fund identifier in WAM parameters storage 418, and WAM optimizationmanager 422 may use any current quotations information in WAM parametersstorage 418 and/or any prices, ratings, yields, and maturitiesinformation in price/yield/maturity storage 419 to identify financialclimate events in WAM parameters storage 418 for which the predictedinterest rate impact is not already priced in to current market prices.In one embodiment, WAM optimization manager 422 makes a determinationwhether the predicted impact on interest rates corresponding to anyfinancial climate event for which the event date is within (or is withina threshold amount of time from) the acceptable WAM range of a fund is apredicted impact that has been priced in to the price of securities, orany other current quotations and/or rates information, at a date priorto the event date corresponding to such financial climate event. Forexample, if inflation is predicted to rise due to a financial climateevent received and stored as described above, causing much higherinterest rates in the future, and if WAM optimization manager 422determines that interest rates or yields for maturities before and aftersuch financial climate event are different in the manner correspondingto such event (e.g. much higher for maturities after the date of anevent for which interest rates are expected to rise) received accordingto current quotations information in WAM parameters storage 418, thenWAM optimization manager 422 determines that the predicted impact oninterest rates associated with such financial climate event has alreadybeen priced into the current prices of securities; and therefore, suchfinancial climate event is not identified as one for which the predictedimpact has not be priced in to current market prices.

In one embodiment, WAM optimization manager 422 identifies the targetWAM corresponding to each family fund, as described above and in moredetail below, using any financial climate events applicable to theacceptable WAM range corresponding to the fund and for which thepredicted impact on interest rates has not already been priced in to thecurrent price of securities. The target WAM for a fund is identified sothat the WAM is between the minimum WAM and maximum WAM for that fund tomaximize the return based on financial climate events that have notalready been priced into the market, for example, extending the targetWAM past a financial climate event for which interest rates are expectedto fall. WAM optimization manager 422 stores each target WAM identifiedin WAM parameters storage 418 associated with the date and time whensuch target WAM is identified and the fund identifier for which thetarget WAM is identified.

Conventional trading and processing times for ETFs and/or mutual fundsare used to receive and process trades for funds in the family. Tradesmay be accepted at any time or at certain times, and they may beprocessed at one time or at different times. For example, trades in amutual fund may be received at any time, and those received before theclose of market trading may be processed after the next such close in aconventional manner. Trades in an ETF may be received at any time andprocessed after the next quotation. Other times may be used. The timesduring which trades are processed may be broken into one or more tradeprocessing periods and trades may be processed at the end of the period.

In the embodiments in which the funds in the family of finds are ETFS,at the start of a trade processing period for each of the funds includedin the family of funds in WAM parameters storage 418, family selectionmanager 430 selects the first fund from the family of funds. In oneembodiment, a trade processing period for funds in a family of ETFsstarts at the opening of the securities market or markets in which thesecurity holdings of the family funds are traded. In one embodiment,family selection manager 430 selects the fund identifier correspondingto the first fund in WAM parameters storage 418.

If the family of funds in WAM parameters storage 418 is a family ofmutual funds, family selection manager 430 provides the selected fundidentifier to mutual fund sell/redeem manager 432. Mutual fundsell/redeem manager 432 receives the selected fund identifier fromfamily selection manager 430, and mutual fund sell/redeem manager 432processes any number of fund shares orders, which it may have receivedat any time since the market last opened and stored internally,corresponding to the received fund identifier. In one embodiment, mutualfund sell/redeem manager 432 sells or redeems fund shares correspondingto the received fund identifier in a conventional manner as describedabove, updates a fund shares log associated with the received fundidentifier in fund shares storage 416, and updates a cash balance logassociated with the received fund identifier in cash account storage412.

To maintain the fund shares log associated with the selected fundidentifier in fund share storage 416 for each purchase or redemption,mutual fund sell/redeem manager 432 generates and stores a uniquetransaction serial number in the fund shares log associated with thereceived fund identifier in fund shares storage 416, along with thenumber of fund shares of the selected fund that have been sold orredeemed, an indication whether such fund shares were sold or redeemed,a shareholder identifier corresponding to the shareholder to whom, orfrom whom, the shares were sold or redeemed, and the date and time whenthe fund shares were sold or redeemed. In one embodiment, mutual fundsell/redeem manager 432 may also keep a running total of the number offund shares of the selected fund that are owned by all shareholders ofsuch fund at the date and time when it processes the fund sharestransaction as described above.

To update the cash balance log associated with the received fundidentifier in cash account storage 412, mutual fund sell/redeem manager432 stores the amount of cash it received or paid out in exchange forsuch fund shares in the cash balance log corresponding to the receivedfund identifier in cash account storage 412. In one embodiment, mutualfund sell/redeem manager 432 stores any amount of cash received fromshareholders, when fund shares are sold, as a positive amount or cashexcess in cash account storage 412, and stores any amount of cash paidout to shareholders, when fund shares are redeemed, as a negative amountor cash deficit.

In one embodiment, mutual fund sell/redeem manager 432 signals cashmanager 436 with fund identifier corresponding to the selected fund.

If the family of funds are ETFs, ETF sell/redeem manager 434 receivesthe fund identifier corresponding to the selected fund from family fundselection manager 430 as described above, and ETF sell/redeem manager434 processes the creation and/or redemption of creation units of theselected fund, which it performs in a manner conventional to ETFs, asdescribed above, with requests for such creations and/or redemptionshaving been received by ETF sell/redeem manager 434 since the prior endof trading day. In one embodiment, ETF sell/redeem manager 434identifies in-kind securities corresponding to the selected fundidentifier in securities storage 414, which may include a fixed basketof in-kind securities, or it may include two or more classes ofsecurities and corresponding parameters, as described above, and ETFsell/redeem manager 434 receives or provides appropriate securities inexchange for creation units of the selected ETF as described above. Inone embodiment, a fixed basket of in-kind securities includes two ormore security identifiers, each with a corresponding proportion and/ornumber of shares. A basket of two or more classes of securities mayinclude two or more security class identifiers, each associated with asubset of two or more security identifiers, and correspondingproportions for the amount of securities from each class of securitiesthat may be traded for creation units as described above.

In one embodiment, as ETF sell/redeem manager 434 creates and/or redeemscreation units of the selected fund in a conventional manner asdescribed above, it updates a creation units log associated with thereceived fund identifier in fund shares storage 416, and updates thefund holdings information associated with the received fund identifierin securities storage 412. In one embodiment, ETF sell/redeem manager434 may also update a cash balance log associated with the received fundidentifier in cash account storage 412 as described below.

In one embodiment, ETF sell/redeem manager 434 updates the creationunits log associated with the received fund identifier in securitiesstorage 412 in a manner similar to the manner described above in whichmutual fund sell/redeem manager 432 stores fund shares transactioninformation in fund shares storage 416. In one embodiment, ETFsell/redeem manager 434 generates and stores a unique transaction serialnumber for the transaction in fund shares storage 414, along with thenumber of creation units created or redeemed and an indication ofwhether the creation units are created or redeemed, a participantidentifier corresponding to the authorized participant to or from whichsuch creation units are sold or redeemed, and the date and time when thecreation units are sold or redeemed. In one embodiment, ETF sell/redeemmanager 434 may store the number of creation units sold or redeemed infund shares storage 416, or ETF sell/redeem manager 434 may store thenumber of shares (i.e. the number of creation units multiplied by thenumber of shares included in each creation unit) sold or redeemed infund shares storage 416. In one embodiment, ETF sell/redeem manager 434may keep a running total in fund shares storage 416 of the total numberof creation units (or ETF shares) corresponding to the received fundidentifier that are owned by authorized participants at the current dateand time.

To update the fund holdings information corresponding to the receivedfund identifier in securities storage 414, ETF sell/redeem manager 434stores the number of shares of each security that it received orprovided in exchange for creation units corresponding to the receivedfund identifier in securities storage 414, along with an indicationwhether such security shares were received or provided, and the date andtime when such security shares were received or provided.

In one embodiment, such as if the in-kind securities corresponding tothe received fund identifier includes a cash component as describedabove, ETF sell/redeem manager 434 additionally updates the cash balancelog associated with the received fund identifier in cash account storage412 by storing the amount of cash it received or paid out in such cashbalance in a manner similar to the manner described above in whichmutual fund sell/redeem manager 432 stores the amount of cash receivedor paid out corresponding to the trading of mutual fund shares in cashaccount storage 412.

In one embodiment, ETF sell/redeem manager 434 may signal cash manager436 with the received fund identifier if cash was received.

Cash manager 436 receives the signal and selected fund identifier frommutual fund sell/redeem manager 432, or from ETF sell/redeem manager434, and cash manager 436 checks the cash balance log associated withthe received fund identifier in cash account storage 412 to determine ifan excess or deficit cash balance is recorded, as described above. Ifcash manager 436 identifies an excess or deficit cash balance in thecash balance log in cash account storage 412 corresponding to thereceived fund identifier, then cash manager 436 may adjust the excess ordeficit cash balance log corresponding to such fund identifier tobalance such excess or deficit (i.e. bring the cash balance closer tozero) by purchasing or selling securities as described above and in moredetail below. In one embodiment, cash manager 436 may also check,monitor, and/or adjust the cash balance log in cash account storage 412associated with the selected fund identifier at any time.

If cash manager 436 identifies an excess, or positive, cash balance(i.e. too much cash) corresponding to the received fund identifier incash account storage 416 (e.g. above a threshold excess amount), thencash manager 436 identifies securities to add to the fund holdings ofthe selected fund (“cash purchase securities”), which are equivalent, ornearly equivalent, to the excess cash balance identified, and whichcontribute favorably to the WAM of the selected fund while maximizingthe return of the selected fund, as described above. In one embodiment,cash manager 436 identifies any cash purchase securities from the listof available, permissible securities in price/yield/maturity storage419.

To determine which available permissible securities contribute favorablyto the WAM of the selected fund, cash manager 436 identifies the WAMcorresponding to the selected fund and the target WAM corresponding tothe selected fund, and then cash manager 436 identifies which available,permissible securities in price/yield/maturity storage 419 may be addedto the selected fund's holdings 414 to place or maintain the WAM ofselected fund within its acceptable WAM range, and also adjust such WAMtoward the target WAM corresponding to the selected fund. In oneembodiment, cash manager 436 identifies securities holdings insecurities storage 414 associated with the received fund identifier,including the dollar amount of each such security holding and thematurity of each such security holding, and cash manager 436 calculatesthe WAM corresponding to the selected fund using such information asdescribed above. In one embodiment, cash manager 436 identifies theacceptable WAM range and target WAM corresponding to the selected fundin WAM parameters storage 419 associated with the received fundidentifier.

To identify the cash purchase securities from the available, permissiblesecurities identified as contributing favorably to the WAM of theselected fund, cash manager 436 evaluates the price, credit qualityrating, and yield corresponding to each of the available, permissiblesecurities using the security evaluation formulas in WAM parametersstorage 418. In one embodiment, cash manager 436 calculates arisk-adjusted yield corresponding to each of any available, permissiblesecurities in price/yield/maturity storage 419, and cash manager 436ranks the securities included in the list of available, permissiblesecurities by risk-adjusted yield, with securities having the highestvalue for their risk-adjusted yield ranked more highly than securitieshaving a lower value for the risk-adjusted yield. Cash manager 436 maystore such values for risk-adjusted yield, as well as any securitiesranking information, in price/yield/maturity storage 419, or cashmanager 436 may store or keep track of them internally.

Cash manager 436 identifies cash purchase securities corresponding tothe received fund identifier (i.e. the securities to add to the holdingsof the selected fund) as the available, permissible securities inprice/yield/maturity storage 419 which have been identified ascontributing favorably to the WAM of the selected fund (i.e. that moveit closer to the target WAM of that fund), and for which therisk-adjusted yield calculated is the highest. Other factors may be usedto identify the purchase or sale of securities as described herein.

Correspondingly, if cash manager 436 identifies a deficit cash balancein the cash balance log associated with the received fund identifier incash account storage 412, then cash manager 436 chooses cash sellsecurities from the securities holdings associated with the receivedfund identifier in securities storage 414 to sell, in an amountequivalent or nearly equivalent to the cash deficit balance identified,in order to optimize the WAM of the selected fund as described above andalso maximize the yield of the selected fund. In one embodiment, cashmanager 436 identifies security holdings in securities storage 414,associated with the received fund identifier, which contributeunfavorably to the target WAM of the selected fund (i.e. those that havea maturity among the furthest from the target WAM), identified in WAMparameters storage 418, and cash manager 426 also evaluates arisk-adjusted yield for each of such identified securities holdings insecurities storage 414 using the security evaluation formulas in WAMparameters storage 418. In one embodiment, cash manager 436 ranks suchsecurity holdings according to such values calculated for risk-adjustedyield, and cash manager 436 identifies cash sell securities as thosesecurity holdings associated with the least favorable yield, or leastfavorable risk-adjusted yield, and that contribute least favorably toadjusting the WAM of the security holdings toward the target WAMcorresponding to the received fund identifier in WAM parameters storage418.

In one embodiment, cash manager 436 purchases or sells, or causes to bepurchased or sold, any cash purchase or cash sell securities it hasidentified corresponding to the received fund identifier via exchangeservers 320 in a conventional manner of trading securities, as describedabove. Cash manager 436 updates the cash balance log in cash accountstorage 412 associated with the received fund identifier with the newcash balance remaining after the identified cash purchase or cash sellsecurities have been purchased or sold. In one embodiment, cash manager436 may also store a transaction record in cash account storage 412,including a transaction serial number it generates, the amount of cashpaid out to purchase, or received to sell, the cash purchase/cash sellsecurities, including the price received or paid for the securities aswell as any commission fees and/or taxes for the securities transaction,and the date and time when such cash was received paid out.

Cash manager 436 adds any securities purchased to, or removes anysecurities holdings sold from, the securities holdings in securitiesstorage 414 associated with the received fund identifier, along with arecord of such securities transaction including the transaction serialnumber it stored in cash account storage 412, a security identifier foreach specific security added or removed, and the amount (or amounts) ofshares of each added or removed security. In one embodiment, for anysecurities added to the securities holdings of the selected fund, cashmanager 436 stores the price, credit quality rating, yield, maturity,and any historical returns information corresponding to such security,as well as any other attributes or information corresponding to thesecurity, in securities storage 414 associated with the received fundidentifier.

When cash manager 436 has checked, and optionally adjusted, the cashbalance log corresponding to the selected fund in cash account storage416 as described herein, cash manager 436 signals optimization trademanager 438 with the selected fund identifier.

Optimization trade manager 438 receives the signal and the fundidentifier corresponding to the selected fund from cash manager 436, andoptimization trade manager 438 determines if the WAM of the selectedfund and/or the risk-adjusted yield of securities holdings of theselected fund may be optimized, or further optimized, by replacing anysecurities holdings of the selected fund with replacement securities, asdescribed above.

In one embodiment, optimization trade manager 438 calculates the WAM ofthe selected fund, as described above, using the investment amounts(price multiplied by number of shares held) corresponding to each of anysecurities holdings associated with the received fund identifiercorresponding to the selected fund in security storage 414, and thecorresponding maturities of each of such holdings.

Optimization trade manager 438 compares the WAM calculated forsecurities holdings of the selected fund to WAM parameters associatedwith the selected fund in WAM parameters storage 418 in the same manneras that described above. In one embodiment, optimization trade manager438 identifies WAM parameters corresponding to the received fundidentifier in WAM parameters storage 418, including the WAM maximum, WAMminimum, and target WAM for the selected fund, and optimization trademanager 438 compares the WAM it calculated for the securities holdingsassociated with the received fund identifier in securities storage 414with such WAM parameters that it identifies in WAM parameters storage418. In one embodiment, optimization trade manager 438 determines if theWAM calculated corresponding to the selected fund's securities holdingsis included in the acceptable WAM range associated with the receivedfund identifier in WAM parameters storage 418 (i.e. WAM is longer thanthe WAM minimum and shorter than the WAM maximum), and also determinesif such WAM calculated for the selected fund's holdings matches, ornearly matches, the target WAM associated with the received fundidentifier in WAM parameters storage 418.

In one embodiment, optimization trade manager 438 additionally uses thesecurity evaluation formulas in WAM parameters storage 418 to calculatea risk-adjusted yield, as described above, for each of any securitiesholdings associated with the received fund identifier in securitiesstorage 414, and also for each of any available, permissible securitiesin price/yield/maturity storage 419. In one embodiment, optimizationtrade manager 438 compares the risk-adjusted yield for securitiesholdings of the selected fund with the risk-adjusted yield foravailable, permissible securities.

If optimization trade manager 438 determines that the WAM calculated forthe security holdings corresponding to the received fund identifier insecurities storage 414 matches or nearly matches the target WAMcorresponding to such fund, and also determines that the risk-adjustedyield corresponding to the securities holdings of the selected fund areoptimized as described above, then optimization trade manager 438signals quotation manager 460 with the fund identifier corresponding tothe selected fund.

Otherwise, optimization trade manager 438 may sell any securitiesholdings associated with the received fund identifier in securitiesstorage 414 and replace them with replacement securities, as describedabove. In one embodiment, optimization trade manager 438 sellssecurities holdings having a maturity that contributes least favorablyto the WAM of the fund maturities and/or having a risk-adjusted yieldthat contributes least favorably to the overall risk-adjusted yield ofthe selected fund, and optimization trade manager 438 may purchase asreplacement securities any of the available, permissible securities inprice/yield/maturity storage 419 which contribute to a more optimalweighted average maturity and/or more optimal risk-adjusted yield thanthe securities holdings that it sells, as described above. Trade offsbetween these two issues may be resolved per the securities evaluationformulas stored in WAM parameters storage 412 for making such tradeoffs.In one embodiment, optimization trade manager 438 may also determinewhether to replace securities or not replace securities, as describedabove, based on any additional commission fees that may be required tosell securities holdings and/or purchase replacement securities, as wellas based on any additional taxes that may be owed when securities aresold at a loss (e.g. such sales, and any other purchases/sales whichminimize the amount of any taxes owed corresponding to the transaction,may be favored) or when securities are sold for a gain (e.g. such sales,and any other securities transactions corresponding to which additionaltaxes may be owed, are disfavored). Optimization trade manager 438signals quotation manager 460 with the selected fund identifier.

Quotation manager 460 receives the signal and selected fund identifierfrom optimization trade manager 438, and quotation manager 460 makes adetermination whether the current time is a quotation time correspondingto the received fund identifier. In one embodiment, a quotation time fora mutual fund may be identified if the trading day on the securitiesmarket trading the fund has just closed, as described above, and aquotation time for any ETF may be identified at any time during whichthe securities market is open and immediately after close. Quotationmanager 460 may use an internal clock, or a system clock, or any othertiming device to determine whether the current time is a quotation timecorresponding to the received fund identifier. Another time or times maybe used to provide quotations, such as any conventional time that mutualfund quotations are provided.

If quotation manager 460 determines that the current time is a quotationtime corresponding to the selected fund identifier, then quotationmanager 460 identifies a total asset value of the securities holdings ofthe selected fund. In one embodiment, quotation manager 460 identifies acorresponding number of shares held of each securities holdingassociated with the received fund identifier in securities storage 414and obtains a quotation or estimate of the value of each such securityfrom one or more quotation servers 312 to determine the total assetvalue corresponding to the selected fund. Quotation manager 460calculates a quotation for the net asset value (NAV) corresponding tothe selected fund using such total asset value calculated, along withthe number of fund shares of the selected fund that are available fortrading, which quotation manager 460 identifies as the number of fundshares associated with the received fund identifier that are sold infund shares storage 416.

In one embodiment, quotation servers 312 also supply bid and ask pricesor yields for shares of the funds in the family, and such shares of suchfunds may be traded via conventional exchange servers 320, for example,if the funds in the family are exchange traded funds, in each case,using conventional techniques.

In one embodiment, if the selected fund is an ETF, quotation manager 460calculates the total asset value of securities held corresponding to theselected fund in securities storage 414, and calculates an intradayquotation (e.g. indicative optimized portfolio value (IOPV) or anintraday indicative value (IIV)) which approximates the NAVcorresponding to the selected fund using such total asset valuecalculated and the number of creation units that are distributed of theselected ETF fund shares storage 416. The portion of quotation manager460 that performs such calculation may reside on quotation server 312 inone embodiment, and provide the quotation to the portion residing inissuer/provider system 322 upon receipt of the holdings of the fund,number of shares, and fund liabilities from the portion of quotationmanager 460 residing in issuer/provider system.

Quotation manager 460 (or either portion of it described above) providesthe calculated quotation for the NAV of the selected fund toshareholders and potential investors of the selected fund via quotationserver 312, which may include a conventional securities quotation serveradapted to handle high transaction volume as described above.

When quotation manager 460 has provided the quotation it calculates forthe selected fund to quotation servers 312, or if quotation manager 460has determined that it is not a quotation time for the selected fund asdescribed above, then quotation manager 460 provides the received fundidentifier corresponding to the selected fund to family fund selectionmanager 430 along with a signal to select the next fund in the family.

Family fund selection manager 430 receives the signal and fundidentifier from quotation manager 460, and family fund selection manager430 determines if any other funds in the family of funds are to beprocessed in the manner described herein. If family fund selectionmanager 430 determines that any such funds exist, then family selectionmanager 430 selects the next of such funds and repeats the process usingthe newly selected fund. In one embodiment, family fund selectionmanager 430 provides the fund identifier corresponding to the newlyselected fund to mutual fund sell/redeem manager 432 or ETF sell/redeemmanager 434 as described above.

In one embodiment, if family fund selection manager 430 determines thatno other funds are to be processed in the manner described herein, thenfamily selection manager 430 may wait for a short period of time, or forno period of time, as described above, and then select the first fundfrom the family of funds as described above, and repeat the processusing the newly selected fund.

SUMMARY

There has been shown a method of operating a plurality of fundsincluding a first fund and a second fund, the method including the stepsof: identifying a first set of at least one security that should be soldfrom the first fund, and a second set of at least one security thatshould be purchased for the first fund, so as to cause a weightedaverage maturity of the first fund to fall within a first range ofweighted average maturities advertised to purchasers of the shares ofthe first fund and to purchasers of shares of the second fund;identifying a third set of securities that should be sold from thesecond fund and a fourth set of securities that should be purchased forthe second fund so as to cause a weighted average maturity of the secondfund to fall within a second range of weighted average maturitiesadvertised to purchasers of the first fund and to purchasers of thesecond fund, the second range being different from the first range;trading the first set of securities and second set of securities usingthe first fund; and trading the third set of securities and fourth setof securities using the second fund.

The method includes an optional feature whereby the second range iscomprises a range of weighted average maturities that are greater than,and entirely outside of, the first range of weighted average maturities.

The method includes an optional feature whereby the second range isadjacent to the first range, and overlaps by no more than one day.

The method may additionally include the steps of identifying a fifth setof at least one security that should be sold from a third fund, and asixth set of at least one security that should be purchased for thethird fund, so as to cause a weighted average maturity of the third fundto fall within a third range of weighted average maturities advertisedto purchasers of the shares of the first fund and to purchasers ofshares of the second fund and to purchasers of the third fund; andtrading the fifth set of securities and sixth set of securities usingthe third fund, and includes an optional feature whereby the third rangeis adjacent to the second range, and overlaps by no more than one day.

The method includes an optional feature whereby wherein the second rangeis not adjacent to the first range.

The method includes an optional feature whereby a first portion of thesecond range of weighted average maturities is greater than any of theweighted average maturities in the first range, and a second portion ofthe second range of weighted average maturities is within the firstrange of weighted average maturities, the second portion comprising aplurality of days. There has been disclosed a system for operating aplurality of funds including a first fund and a second fund, the systemincluding a family fund selection manager for selecting and providing atan output an identifier of the first fund or the second fund; and anoptimization trade manager having an input coupled to the family fundselection manager for receiving the identifier of the first fund or thesecond fund, the optimization trade manager for: responsive to theidentifier received at the optimization trade manager input comprisingthe identifier of the first fund, identifying a first set of at leastone security that should be sold from the first fund, and a second setof at least one security that should be purchased for the first fund, soas to cause a weighted average maturity of the first fund to fall withina first range of weighted average maturities advertised to purchasers ofthe shares of the first fund and to purchasers of shares of the secondfund, and trading via an input/output, the first set of securities andsecond set of securities using the first fund; and responsive to theidentifier received at the optimization trade manager input comprisingthe identifier of the second fund, identifying a third set of securitiesthat should be sold from the second fund and a fourth set of securitiesthat should be purchased for the second fund so as to cause a weightedaverage maturity of the second fund to fall within a second range ofweighted average maturities advertised to purchasers of the first fundand to purchasers of the second fund, the second range being differentfrom the first range, and trading via the optimization trade managerinput/output, the third set of securities and fourth set of securitiesusing the second fund.

The system includes an optional feature whereby the second range iscomprises a range of weighted average maturities that are greater than,and entirely outside of, the first range of weighted average maturities.

The system includes an optional feature whereby the second range isadjacent to the first range, and overlaps by no more than one day.

The system includes an optional feature whereby the family fundselection manager selects and provides at the family fund selectionmanager output an identifier of the first fund or the second fund or athird fund, the optimization trade manager is additionally for,responsive to the identifier received at the optimization trade managerinput comprising the identifier of the first fund, identifying a fifthset of at least one security that should be sold from a third fund, anda sixth set of at least one security that should be purchased for thethird fund, so as to cause a weighted average maturity of the third fundto fall within a third range of weighted average maturities advertisedto purchasers of the shares of the first fund and to purchasers ofshares of the second fund and to purchasers of the third fund and fortrading, via the optimization trade manager input/output, the fifth setof securities and sixth set of securities using the third fund; and thethird range is optionally adjacent to the second range, and overlaps byno more than one day.

The system includes an optional feature whereby the second range is notadjacent to the first range.

The system includes an optional feature whereby a first portion of thesecond range of weighted average maturities is greater than any of theweighted average maturities in the first range, and a second portion ofthe second range of weighted average maturities is within the firstrange of weighted average maturities, the second portion comprising aplurality of days.

There has been shown a computer program product computer program productincluding a computer useable medium having computer readable programcode embodied therein for operating a plurality of funds including afirst fund and a second fund, the computer program product includingcomputer readable program code devices configured to cause a computersystem to identify a first set of at least one security that should besold from the first fund, and a second set of at least one security thatshould be purchased for the first fund, so as to cause a weightedaverage maturity of the first fund to fall within a first range ofweighted average maturities advertised to purchasers of the shares ofthe first fund and to purchasers of shares of the second fund, identifya third set of securities that should be sold from the second fund and afourth set of securities that should be purchased for the second fund soas to cause a weighted average maturity of the second fund to fallwithin a second range of weighted average maturities advertised topurchasers of the first fund and to purchasers of the second fund, thesecond range being different from the first range, trade the first setof securities and second set of securities using the first fund, andtrade the third set of securities and fourth set of securities using thesecond fund.

The computer program product includes an optional feature whereby thesecond range is comprises a range of weighted average maturities thatare greater than, and entirely outside of, the first range of weightedaverage maturities.

The computer program product includes an optional feature whereby thesecond range is adjacent to the first range, and overlaps by no morethan one day.

The computer program product may additionally include computer readableprogram code devices configured to cause the computer system to identifya fifth set of at least one security that should be sold from a thirdfund, and a sixth set of at least one security that should be purchasedfor the third fund, so as to cause a weighted average maturity of thethird fund to fall within a third range of weighted average maturitiesadvertised to purchasers of the shares of the first fund and topurchasers of shares of the second fund and to purchasers of the thirdfund, and trade the fifth set of securities and sixth set of securitiesusing the third fund, and includes an optional feature whereby the thirdrange is adjacent to the second range, and overlaps by no more than oneday.

The computer program product includes an optional feature whereby thesecond range is not adjacent to the first range.

The computer program product includes an optional feature whereby afirst portion of the second range of weighted average maturities isgreater than any of the weighted average maturities in the first range,and a second portion of the second range of weighted average maturitiesis within the first range of weighted average maturities, the secondportion comprising a plurality of days.

Any of the above may include a system, method or computer programproduct that identifies a target weighted average maturity for each ofthe first and second funds, and optionally the third fund, and thefirst, second, third, fourth, fifth and sixth sets of at least onesecurity may be identified responsive to the target weighted averagematurity for the fund used to trade such sets.

What is claimed is:
 1. A computer-based method of operating a pluralityof funds comprising a first fund and a second fund, comprising:computing, by a programmed hardware computer processor coupled to acomputer memory, a first weighted average maturity of the first fund;comparing, by the programmed hardware computer processor coupled to thecomputer memory, the first weighted average maturity of the first fundcomputed, with a first range of weighted average maturities advertisedto purchasers of shares of the first fund and to purchasers of shares ofthe second fund; determining, by the programmed hardware computerprocessor coupled to the computer memory, whether the first weightedaverage maturity of the first fund computed is outside the first rangeof weighted average maturities advertised to purchasers of shares of thefirst fund and to purchasers of shares of the second fund; if the firstweighted average maturity of the first fund computed is outside thefirst range of weighted average maturities advertised to purchasers ofshares of the first fund and to purchasers of shares of the second fund,identifying, by the programmed hardware computer processor coupled tothe computer memory, a first set of at least one security that should besold from the first fund, and a second set of at least one security thatshould be purchased for the first fund, so as to cause a second weightedaverage maturity of the first fund to fall within the first range ofweighted average maturities advertised to purchasers of shares of thefirst fund and to purchasers of shares of the second fund; computing, bythe programmed hardware computer processor coupled to the computermemory, a first weighted average maturity of the second fund; comparing,by the programmed hardware computer processor coupled to the computermemory, the first weighted average maturity of the second fund computed,with a second range of weighted average maturities advertised topurchasers of shares of the first fund and to purchasers of shares ofthe second fund; determining, by the programmed hardware computerprocessor coupled to the computer memory, whether the first weightedaverage maturity of the second fund computed is outside the second rangeof weighted average maturities advertised to purchasers of shares of thefirst fund and to purchasers of shares of the second fund; if the firstweighted average maturity of the second fund computed is outside thesecond range of weighted average maturities advertised to purchasers ofshares of the first fund and to purchasers of shares of the second fund,identifying, by the programmed hardware computer processor coupled tothe computer memory, a third set of securities that should be sold fromthe second fund and a fourth set of securities that should be purchasedfor the second fund so as to cause a second weighted average maturity ofthe second fund to fall within the second range of weighted averagematurities advertised to purchasers of the shares of the first fund andto purchasers of the shares of the second fund, the second range beingdifferent from the first range; trading the first set of at least onesecurity and second set of at least one security using the first fund;and trading the third set of securities and fourth set of securitiesusing the second fund.
 2. The method of claim 1, wherein the secondrange is a range of weighted average maturities that are greater than,and entirely outside of, the first range of weighted average maturities.3. The method of claim 1, wherein the second range is adjacent to thefirst range, and overlaps by no more than one day.
 4. The method ofclaim 3: additionally comprising: identifying a fifth set of at leastone security that should be sold from a third fund, and a sixth set ofat least one security that should be purchased for the third fund, so asto cause a weighted average maturity of the third fund to fall within athird range of weighted average maturities advertised to purchasers ofthe shares of the first fund and to purchasers of shares of the secondfund and to purchasers of the third fund; and trading the fifth set ofat least one security and sixth set of at least one security using thethird fund; and wherein the third range is adjacent to the second range,and overlaps by no more than one day.
 5. The method of claim 1, whereinthe second range is not adjacent to the first range.
 6. The method ofclaim 1, wherein a first portion of the second range of weighted averagematurities is greater than any of the weighted average maturities in thefirst range, and a second portion of the second range of weightedaverage maturities is within the first range of weighted averagematurities, the second portion comprising a plurality of days.
 7. Asystem for operating a plurality of funds comprising a first fund and asecond fund, comprising: a family fund selection manager for selectingand providing at an output an identifier of the first fund or the secondfund; and an optimization trade manager having an input coupled to thefamily fund selection manager for receiving the identifier of the firstfund or the second fund, the optimization trade manager comprising ahardware processor coupled to a memory, the hardware processorprogrammed for: responsive to the identifier received at theoptimization trade manager input comprising the identifier of the firstfund, identifying a first set of at least one security that should besold from the first fund, and a second set of at least one security thatshould be purchased for the first fund, so as to cause a weightedaverage maturity of the first fund to fall within a first range ofweighted average maturities advertised to purchasers of shares of thefirst fund and to purchasers of shares of the second fund, and tradingvia an input/output, the first set of at least one security and secondset of at least one security using the first fund; and responsive to theidentifier received at the optimization trade manager input comprisingthe identifier of the second fund, identifying a third set of securitiesthat should be sold from the second fund and a fourth set of securitiesthat should be purchased for the second fund so as to cause a weightedaverage maturity of the second fund to fall within a second range ofweighted average maturities advertised to purchasers of the shares ofthe first fund and to purchasers of the shares of the second fund, thesecond range being different from the first range, and trading via theoptimization trade manager input/output, the third set of securities andfourth set of securities using the second fund.
 8. The system of claim7, wherein the second range is a range of weighted average maturitiesthat are greater than, and entirely outside of, the first range ofweighted average maturities.
 9. The system of claim 7, wherein thesecond range is adjacent to the first range, and overlaps by no morethan one day.
 10. The system of claim 9, wherein: the family fundselection manager selects and provides at the family fund selectionmanager output an identifier of the first fund or the second fund or athird fund; the optimization trade manager is additionally for,responsive to the identifier received at the optimization trade managerinput comprising the identifier of the first fund, identifying a fifthset of at least one security that should be sold from the third fund,and a sixth set of at least one security that should be purchased forthe third fund, so as to cause a weighted average maturity of the thirdfund to fall within a third range of weighted average maturitiesadvertised to purchasers of the shares of the first fund and topurchasers of shares of the second fund and to purchasers of the thirdfund and for trading, via the optimization trade manager input/output,the fifth set of securities and sixth set of securities using the thirdfund; and the third range is adjacent to the second range, and overlapsby no more than one day.
 11. The system of claim 7, wherein the secondrange is not adjacent to the first range.
 12. The system of claim 7,wherein a first portion of the second range of weighted averagematurities is greater than any of the weighted average maturities in thefirst range, and a second portion of the second range of weightedaverage maturities is within the first range of weighted averagematurities, the second portion comprising a plurality of days.
 13. Acomputer program product comprising a nontransitory computer useablemedium having computer readable program code embodied therein foroperating a plurality of funds comprising a first fund and a secondfund, the computer program product comprising computer readable programcode devices configured to program a hardware computer processor tocause a computer system to: compute a first weighted average maturity ofthe first fund; compare the first weighted average maturity of the firstfund computed, with a first range of weighted average maturitiesadvertised to purchasers of shares of the first fund and to purchasersof shares of the second fund; determine whether the first weightedaverage maturity of the first fund computed is outside the first rangeof weighted average maturities advertised to purchasers of shares of thefirst fund and to purchasers of shares of the second fund; if the firstweighted average maturity of the first fund computed is outside thefirst range of weighted average maturities advertised to purchasers ofshares of the first fund and to purchasers of shares of the second fund,identify a first set of at least one security that should be sold fromthe first fund, and a second set of at least one security that should bepurchased for the first fund, so as to cause a second weighted averagematurity of the first fund to fall within the first range of weightedaverage maturities advertised to purchasers of shares of the first fundand to purchasers of shares of the second fund; compute a first weightedaverage maturity of the second fund; compare the first weighted averagematurity of the second fund computed, with a second range of weightedaverage maturities advertised to purchasers of shares of the first fundand to purchasers of shares of the second fund; determine whether thefirst weighted average maturity of the second fund computed is outsidethe second range of weighted average maturities advertised to purchasersof shares of the first fund and to purchasers of shares of the secondfund; if the first weighted average maturity of the second fund computedis outside the second range of weighted average maturities advertised topurchasers of shares of the first fund and to purchasers of shares ofthe second fund, identify a third set of securities that should be soldfrom the second fund and a fourth set of securities that should bepurchased for the second fund so as to cause a second weighted averagematurity of the second fund to fall within the second range of weightedaverage maturities advertised to purchasers of the shares of the firstfund and to purchasers of the shares of the second fund, the secondrange being different from the first range; trade the first set of atleast one security and second set of at least one security using thefirst fund; and trade the third set of securities and fourth set ofsecurities using the second fund.
 14. The computer program product ofclaim 13, wherein the second range is a range of weighted averagematurities that are greater than, and entirely outside of, the firstrange of weighted average maturities.
 15. The computer program productof claim 13, wherein the second range is adjacent to the first range,and overlaps by no more than one day.
 16. The computer program productof claim 15: additionally comprising computer readable program codedevices configured to cause the computer system to: identify a fifth setof at least one security that should be sold from a third fund, and asixth set of at least one security that should be purchased for thethird fund, so as to cause a weighted average maturity of the third fundto fall within a third range of weighted average maturities advertisedto purchasers of the shares of the first fund and to purchasers ofshares of the second fund and to purchasers of the third fund; and tradethe fifth set of at least one security and sixth set of at least onesecurity using the third fund; and wherein the third range is adjacentto the second range, and overlaps by no more than one day.
 17. Thecomputer program product of claim 13, wherein the second range is notadjacent to the first range.
 18. The computer program product of claim13, wherein a first portion of the second range of weighted averagematurities is greater than any of the weighted average maturities in thefirst range, and a second portion of the second range of weightedaverage maturities is within the first range of weighted averagematurities, the second portion comprising a plurality of days.